LIBERTY: Should the Fed bailout failing corporations like AIG? NO! The FED shouldn’t even exist.

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Dave Taylor has been involved with the Internet since 1980 and is widely recognized as an expert on both technical and business issues.
Should the Fed bailout failing corporations like AIG?

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As an investor and citizen, I have been following with increasing concern the shenanigans in the financial market. First it was the huge problem with greedy banks and an overextended Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) that had underwritten loans to more and more risky borrowers, gambling that the upside of high-interest-rate loans would offset the tremendous risk of default.

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Which is why I find it so interesting that when I read the WSJ headline that Feds Plan $85 Billion Rescue Deal for AIG [sub required] or the Bloomberg report that the government is considering an AIG conservatorship plan, I dislike the notion and feel that if we really were a free market capitalist economy, we’d let the companies fail, knowing that new ones will spring up to replace them, stronger, smarter companies that will avoid these poor management decisions.

Fannie Mae – fanniemae – logoFannie Mae and Freddie Mac were bailed out by the government. So was Chrysler, years ago, in a quite hotly debated rescue from mismanagement, Lee Iacocca’s hubris, and poor strategic planning. But Enron wasn’t bailed out and the Enron investors were left to their own personal financial nightmares.

The rule seems to be that if it’s a big enough company or enough people are adversely impacted then the never-empty wallet of the Federal government opens up and billions of taxpayer dollars are allocated to alleviate the impending crisis.

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Since then both Clinton and Bush aggressively promoted home ownership, even for homeowners who couldn’t afford it. The magic solution? adjustable rate mortgages that had a low interest rate when the prime rate was low, but could rapidly grow to create unmanageable mortgage payments as the rate went up. Now those high risk subprime loans back almost 40% of private-sector mortgage bonds and that’s the root of the financial problem we now face.

Back to the central dilemma, though: should we bail out AIG or not? Should our hard earned dollars paid to the government as taxes be used to prevent these massive corporations from facing the dire consequences of their stupid, myopic actions?

I have to say that, yes, I think that we should. Or at least, we should have some sort of program that helps out those most affected by the demise of these companies. When mortgage holders find that their adjustable rate mortgages prove a nightmare because the rates have gone up, that’s one issue, but when a large corporation actively and aggressively markets to these subprime borrowers without fear of consequence, that’s very, very bad for the market.

The consequences are what we’re feeling today, with a dramatic drop in the financial market, the bankruptcy of Lehman, Federal bailout of AIG, and more to come as the ripples affect other markets and industries. Bailout because too many regular Joes are affected by these failures, but for goodness sake, tighten regulations and fix things so that we can prevent this happening again in the future!

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The politicians get to pick winners and losers. Lehman loses; AIG gets bailed out. Freddie and Fannie shareholders get wiped out and the CEOs walk away with taxpayer-paid golden chutes.

The taxpayers get 80% of AIG; in bankruptcy, the common stockholders would get zero and the taxpayers would get 100%. Who died and left the Fed as the bankruptcy court?

IMHO we need to let biz be biz and the chips fall where they may. Nuke the Fed! Return to honest money.

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MONEY: Hope all your eggs weren’t in some big company’s stock?

The Mess On Wall Street: Four Trillion Dollars Down The Drain

The Mess On Wall Street: Four Trillion Dollars Down The Drain by Erick Schonfeld on September 16, 2008

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Each box in the graphic is proportional to the size of the market capitalization of the biggest financial firms then and now. As you mouse over the squares, you can see how much each value each company lost between October 9, 2007 and September 12, 2008. Here are some of the individual losses by market cap:

Citigroup: $236.7 billion to $97.8 billion.

Bank of America: $236.5 billion to $150.2 billion.

AIG: $179.8 billion to $32.3 billion

Goldman Sachs: $97.7 billion to $61.3 billion

American Express: $74.8 billion to $45 billion.

Morgan Stanley: $73.1 billion to $41.1 billion.

Fannie Mae: $64.8 billion to $700 million.

Merrill Lynch: $63.9 billion to $24.2 billion

Freddie Mac: $41.5 billion to $300 million.

Lehman Brothers: $34.4 billion to $2.5 billion.

Washington Mutual: $31.1 billion to $2.9 billion

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Ouch! Never mind these companies’ “market capitalization”!! What we are seeing is the pensions and retirements of some folks going up in smoke. Never to return. Some one (all of us) is taking these losses.


And, politician talk about the various “lipstick” issues!

Where are the two fellows now? We need smaller gooferment, now! Do they think that “tax receipts” (i.e., the money they steal from us) is going to increase to pay for all their new programs? Or that there will be any “rich” left to steal from? Unemployment insurance, Social Security Ponzi benefits, Gooferment pensions.

Watch the screwing we will all take!

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POLITICS: One of the few cogent arguments for O?

John McCain and Thinking the Unthinkable
by Charles Davenport

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I think it imperative, and very possibly a matter of national survival, that Barack Obama, and not John McCain, becomes president. Yes, it will mean higher taxes and boondoggle social programs and yes, he has called for more troops in Afghanistan and waffled on any number of key issues.

But Obama, or even Joe Biden, will be better able to act prudently in a time of crisis and not plunge our country into a war with Putin’s Russia. We should seek friendship with Russia, not war.

We need not fear Moslem terrorists. But we should rightly fear an intemperate man like John McCain, and the clueless Sarah Palin.

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I’m not so sure that this is the argument.

O’s tax raising and corrupt beginnings make him seem the GREATER of two evils.

I’m annoyed at a system that prevents me from voting for whom I want. I’m forever compelled to select the lesser of two evils.

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POLITICAL: The moral hazzard aka when the gooferment picks winners and losers!

* SEPTEMBER 16, 2008

U.S. to Take Over AIG in $85 Billion Bailout;
Central Banks Inject Cash as Credit Dries Up
Emergency Loan Effectively Gives Government Control of Insurer;
Historic Move Would Cap 10 Days That Reshaped U.S. Finance

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The U.S. government seized control of American International Group Inc. — one of the world’s biggest insurers — in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.

The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. Just last weekend, the government essentially pulled the plug on Lehman Brothers Holdings Inc., allowing the big investment bank to go under instead of giving it financial support. This time, the government decided AIG truly was too big to fail.

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Sorry, but the gooferment should NOT be picking winners and losers. Sorry “Lehman Brothers” stockholders and employees, you lose. Fannie and Freddie, you win. Fannie and Freddie CEOs get big golden parachutes; so they win big.

Who’s the biggest losers? Why the American Taxpayers, of course, silly rabbit!

Get ready Ford and GM retirees, you’re screwing is just around the corner!

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PRODUCTIVITY: “Abandon ship” doesn’t mean “linger aound”!

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evacuation Information that could save your life

The World’s largest study into the 911 evacuation of the World Trade Center has just begun. However, there have been several smaller studies into the WTC evacuation based on printed accounts from WTC evacuees (for example, go to the following pages to find the UK Building Disaster Assessment Group (BDAG) analysis of the evacuation: While these studies have been limited in their scope we have learnt a number of important lessons that could save your life.

Lesson One – Don’t do anything to delay your departure

Lesson Two – Know your way out

Lesson Three – Don’t stop on the way to reassure friends and family

Lesson Four – Ladies, don’t discard your shoes on the stairs

Lesson Five – Know how long it will take to get out

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When I had a group in WTC, during the first bombing, the supervisor there called me for instructions what to do. My answer was quick: “Send everyone home now! Have them call me when they get home. Go home yourself, and do the same. We’ll figure it out from there. Go now!” And, I hung up on her.

I didn’t check with anyone. Didn’t have to. It was common sense.

I then called my boss to tell him what I did. “Good! At least you’re not one of the stupid ones I have working for me. But, don’t expect a medal. Now get off my phone. You must have work to do!” And, he hung up.

p.s., I got gigged in my annual appraisal for not checking with HR for the correct policy.

Seems easy to me. You can always find another job!

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